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The Euro traded lower against the US Dollar ahead of a report that is expected to show that the Euro Zone trade surplus shrank for the first time since May as the single currency approaches the 1.50 level against the US Dollar, threatening exporters and policymakers alike.

Key Overnight Developments

• Foreign Investors' NZ Bond Holdings Lowest in Five Months
• Euro Slips, British Pound Plows Ahead in Overnight Trading


Critical Levels

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The Euro tried higher in early overnight trading but lost momentum and looks to start European trading on a down note, ticking -0.1% lower against the US Dollar. The British Pound retained bullish momentum, however, adding as much as 0.8% against the greenback.

Asia Session Highlights

The share of New Zealand government bonds owned by foreigners declined to 72.1% in September, the second consecutive month that overseas investors reduced their holdings of the high-yielding sovereign paper and the lowest percentage of the nation's outstanding debt since April. While it is surely too early to draw any firm conclusions from the outcome, it is interesting to note that this marks the first series of back-to-back declines since the two months through December 2008, which had preceded a 18.4% in global equities ahead of the low established in March when the capital markets put in a low and turned away from safe-haven plays in favor of higher-yielding (and riskier) investments. New Zealand boasts the second-highest interest rates in the G10, and an apparent turn away from such attractive returns may be among the early signs that risk appetite is waning.

Euro Session: What to Expect

Switzerland's Retail Sales report is the only notable item on the calendar for European hours, with expectations calling for receipts to add 0.8% in the year to August, down from the 1.0% gain registered in the previous month. Leading indicators suggest continued weakening is head: a UBS gauge that aims to forecast consumption trends about three to four months into the future fell to the lowest in nearly six years in August as mounting job losses trimmed incomes and weighed on spending. The jobless rate surged to 3.9% in September, the highest in nearly four years, and a survey of economists polled by Bloomberg forecasts that it will reach as high as 5% next year.

The Euro Zone Trade Balance surplus is set to narrow to just 2.5 billion euro in August, the first contraction since May. Traders will be looking for signs that the buoyant Euro is meaningfully hurting exports and threatening the currency bloc's prospects of economic recovery as prices approach 1.50 to the US Dollar, a key psychological barrier thought to be near the limit of the ECB's comfort zone.

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